Revisiting the history of Middle-Out Economics (with Michael Tomasky)

Episode Summary

Executive Summary: The episode traces the origin and evolution of "middle-out economics" as a deliberate counter-narrative to trickle-down economics. Nick Hanauer, David Goldstein, and Michael Tomasky explain how the term was crafted, why it resonates, how empirical economics has shifted toward middle-out ideas, and why progressive policy, democracy, and public re-education are now tightly linked.

Main Topics: Origins of Middle-Out Economics (Priority: 5/5): Nick Hanauer explains that middle-out was created to sharply contrast with trickle-down economics and provide an affirmative alternative narrative for progressive policy. Economics as Storytelling and Positioning (Priority: 4/5): The hosts discuss marketing and narrative strategy, arguing that ideas must be framed in contrast to be understood and that naming the enemy helps mobilize support. Historical Arc of U.S. Economic Paradigms (Priority: 5/5): Michael Tomasky summarizes his book's first section, tracing the rise of Keynesian/New Deal liberalism, its decline in the 1970s, and the ascent of Friedman-style neoliberalism and supply-side economics. Empirical Economics Challenging Old Orthodoxy (Priority: 5/5): The conversation highlights how better data, computers, and empirical research have exposed the weaknesses of older theoretical models, especially on minimum wage and labor markets. Middle-Out as a Theory of Inclusion and Growth (Priority: 5/5): Tomasky and Hanauer argue that economies grow faster and more inclusively when more people are fully included, because people are the core economic resource. Politics, Democracy, and Wealth Concentration (Priority: 4/5): The hosts connect economic inequality to democratic decline, arguing that the transfer of wealth to the top weakens democracy and fuels oligarchy and demagoguery. Communication, Journalism, and Public Re-education (Priority: 4/5): They criticize media shorthand and model-driven reporting, calling for Democrats and public voices to better explain economics using clearer language and framing.

Key Arguments: Middle-out economics was intentionally designed as a counter-narrative to trickle-down economics, because progressive politics needs an affirmative theory of growth, not just a rejection of the old one. Narratives in economics and politics work through contrast: people understand ideas better when they are positioned against an opposing framework, which is why naming "trickle-down" matters. The shift in economics toward middle-out thinking is increasingly grounded in evidence rather than ideology; the profession has moved toward empirical research that supports inclusion and labor power. There is no real trade-off between inclusion/equality and growth; more inclusive economies can grow faster and more sustainably. The central economic fact of the last 40 years is a massive transfer of wealth from the middle to the top, and reversing that transfer is essential for both prosperity and democracy. A stronger middle class supports democracy and freedom, while extreme concentration of wealth and power pushes society toward oligarchy. Journalists often repeat model outputs uncritically, which distorts public understanding of economics and policy costs. Individual citizens can contribute by voting, supporting local wage campaigns, and challenging bad economic myths in everyday conversation. The Biden administration's economic successes are attributed to governing with a counter-narrative that emphasizes inclusion, investment, and middle-out growth. Progressive economists and advocates must engage in a long-term public re-education project to change baseline assumptions about how the economy works.

Data Points: Year Tomasky’s middle-out article was published: 2014 - Nick Hanauer and David Goldstein reference their long-running collaboration and the early articulation of middle-out in Democracy Journal. Estimated wealth transfer from middle to top: $50 trillion - Tomasky cites a 2020 Rand Corporation study describing wealth transferred upward over the last 40 years. Biden student loan forgiveness CBO estimate: $400 billion - Discussed as an example of misleading reporting without noting the full time horizon. Time horizon for student loan forgiveness estimate: 33 years - Tomasky notes the estimate was spread over 33 years, not a single year. Approximate annual cost of student loan forgiveness: $20 billion per year - Derived from the 33-year estimate and contrasted with other large spending figures. U.S. stock buybacks per year: $1.2 trillion - Used to show the relative scale of the student debt forgiveness figure. Minimum wage empirical study year: 1994 - Card and Kruger’s minimum wage study is cited as a turning point in empirical labor economics. Time span of economic paradigm shift: 1930s to Great Recession - Tomasky describes the book’s historical section as covering the rise and fall of Keynesianism and neoliberalism across this period.

Pivotal Quotes: "We knew, or I knew, that in order to defeat trickle-down economics, we had to build an alternative that contrasted with it very sharply." — Nick Hanauer: Explaining why middle-out economics was invented as a deliberate counter-narrative. "The more people you fully include in the economy, the faster and more prosperous and more inclusive it grows." — Nick Hanauer: Summarizing the core inclusionary principle behind middle-out economics. "The economy is people." — Nick Hanauer: Used to emphasize that human inclusion, not capital alone, drives growth.

Implications: The episode argues that winning future economic debates depends on clearer narratives, stronger empirical evidence, and sustained public education. For listeners, the takeaway is that inclusive growth and democracy are linked, and both require active political and conversational engagement.